In one sentence: A group of short sellers suddenly gets counter-killed by the price, all scared shitless and scrambling to buy back to cover their debts, which drives the price even higher, leading to even worse liquidations for those behind, a vicious cycle that shoots straight to the moon!
 

The classic scene looks like this:

A bunch of big shots are bearish on BTC, pulling 100x leverage to wildly open shorts

 

Suddenly, a big green candle appears, or Musk tweets, or the US approves ETFs

 

Price rises, all short positions start floating in loss

 

Stop-loss orders and forced liquidations trigger like an avalanche

 

All shorts market buy back coins together → Buy orders explode → Price continues to surge → More shorts get liquidated

 

Within ten minutes, price can pump 30%-200%, turning million-dollar assets to zero for those behind

The most famous meat grinder scenes

  • January 2021 GameStop: Retail investors band together to pump the stock from $20 to $483, short-selling institutions bleed billions
  • May 2021 BTC: Flashes down from 64k to 30k, but gets counter-killed by the bulls midway, liquidating $8 billion in shorts in one hour
  • 2024 SOL: From being shorted at $18 to $260, wiping out $2 billion in shorts in three days, leveraged players everywhere in ruins

Why is short squeeze so brutal? Four necessary conditions

  • Insanely high short positions (long/short ratio at least 2:1 or more)
  • Leverage pulled sky-high (50x or above easiest to get one-shot)
  • Sudden positive news no one saw coming (tweets, policies, whale buys)
  • Liquidity dries up instantly, shorts can't even run if they want to

Want to smell short squeeze early? Watch these signals

  • Severely imbalanced long/short ratio (visible on Binance, Bybit)
  • Funding rate turns extremely negative (shorts paying tons to longs)
  • Borrow rates suddenly spike to 100%-300% (means shorts can't borrow coins anymore)
  • On-chain whales start hoarding spot coins like crazy

Want to eat this meat? Two ways to play

  • Ambush long positions early, take off directly when squeeze starts
  • Be the meat grinder starter yourself: Pump the price, spread good news, lead the narrative, scare shorts into mass panic selling

Want to avoid getting minced? Three iron rules

  • Don't short with over 10x leverage, anything higher is just donating to the exchange
  • Always set stop-loss, and place it outside the recent high to avoid getting pierced in one go
  • Once funding rate goes ridiculously negative or borrow rates explode, run fast, what's coming is a slaughterhouse

Final tearful summary

Short squeeze is the crypto version of "Final Destination":

 

When you hear the sound of the "liquidation waterfall,"

 

Either you're the long eating the meat,

 

Or you're the meat on the plate.

 

No third option.

 

Shorting is fine, but never forget:

 

The market can stay irrational longer than you can imagine,

 

And short squeeze always comes faster than your stop-loss.

 

Only the survivors get to eat the meat off the corpses in the end.